Chinese chip stocks fall as Biden expands tech cap

(Bloomberg) – China’s semiconductor shares tumble after the United States restricted China’s access to American technology added to a disappointing start to the earnings season, stoking fears that a The industry downturn is far from over.

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Bellwether Semiconductor Manufacturing International Corp. fell as much as 5.2% in Hong Kong on Monday, the highest since Aug. 15. The drop deepened in smaller stocks. Hua Hong Semiconductor Ltd. fell 10%, while Shanghai Fudan Microelectronics Group Co., plummeted 25%, the most in seven years. Will Semiconductor Co. and Maxscend Microelectronics Co. more than 6% off each.

The US measures include restrictions on the export of certain types of chips used in artificial intelligence and supercomputers, as well as stricter regulations on the sale of semiconductors to any Chinese company. any. In addition, the US also added more Chinese companies to the list of companies it considers “unverified”, which means that US suppliers will face barriers. new in selling technology to such entities.

Gabriel Wildau, an analyst at consulting firm Teneo Holdings LLC, said the new strategy shows Washington aims to “freeze” China at current levels, allowing the US to increase its lead.

Chinese Foreign Ministry spokesman Mao Ning on Saturday said the measures that will come into effect this month are unfair and “will also harm the interests of US companies”. “They deal a huge blow to global industrial and supply chains as well as the world economic recovery,” she said.

What Bloomberg Intelligence says

“SMIC revenue could grow at a 50% slower rate than we expect in 2023 based on tougher US equipment export license requirements, as 48% of new capacity company’s to be installed next year is in the field of advanced chip manufacturing 28 nanometers or less. . “

– Charles Shum, analyst

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The slide in chip stocks also followed a 6.1% drop in the Philadelphia Semiconductor Index on October 7, after strong labor market data bolstered expectations of a Federal Reserve move. will increase interest rates more strongly.

The new US regulations come at a time when the chip industry has been grappling with an ominous start to earnings season and has gone from a worldwide chip shortage to a surplus in a matter of months due to the calculation boom and bust of the semiconductor bridge.

Samsung Electronics Co., the world’s largest memory chip maker and PC processor maker Advanced Micro Devices Inc. reported results last week that showed a frighteningly deeper slowdown ahead.

Analyst David Wong of Nomura Holdings Inc. wrote in a note “a big setback for China” and “bad news” for global semiconductors. China’s localization efforts could also be “at risk because the country cannot use the advanced foundries in Taiwan and South Korea,” he wrote.

Among other stocks, Naura Technology Group Co., plummeted to its 10% mainland daily limit, while Advanced Micro-Fabrication Equipment Inc. and ACM Research Shanghai Inc., each fell more than 16%.

The US Department of Commerce has added Beijing Naura Electromagnetic Technology Co, a subsidiary of Naura to its Unverified List, the company said in a filing.

To be sure, growing Sino-US tensions could prompt Beijing to increase its support for homegrown companies in an effort to achieve its goal of becoming an independent chip power.

A drop in Chinese chip stocks could hurt the sector globally. The markets of Japan, South Korea, Taiwan and Malaysia will have a chance to react on Tuesday as they are closed on Monday.

“This will not only be negative for the Chinese semiconductor industry, but also indirectly affect the long-term business opportunities of global semiconductor manufacturers,” Citigroup analysts include. Laura Chen wrote in a note.

The broader Chinese stock market also saw a decline on Monday after returning from the Golden Week holiday, hit by a sell-off in global equities and dismal holiday spending data. raising concerns about an economic recovery.

Read: Chinese stocks slide as traders return from Golden Week holiday

(Updated with analyst comments throughout.)

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